ABSTRACT
This chapter explains the relevance of macroeconomic management in contributing to the success in the economic development process and to analyse the causes of the failure. It presents the characteristics of economic growth in Southeast Asia between 1981 and 1985. The chapter discusses the stylized facts of their development pattern, which are linked with macroeconomic management, where the roles of foreign direct investment, public investment in human capital, and the monetary and fiscal policies. It examines the reasons for the disappointing performance of the economies in terms of decelerating growth rate and plunging exchange rates. The chapter analyses the contagion effect of the currency crisis. Successful financial liberalization requires price stability in terms of low and controllable inflation rates. Financial liberalization in the capital account and the banking sector should be delayed until both macroeconomic stability and prudent financial regulation and capable supervision are firmly established.
